Nearly 200,000 businesses are struggling to keep up with their Bounce Back Loan repayments new figures show.
Data from the British Business Bank, who oversaw the distribution of loans, shows that 193,000 businesses hadn’t managed to keep up with their repayment obligations by the end of June 2022.
These figures exceed the official number of 106,000 which was last updated in september 2021 and represents nearly 1 in 8 of the 1.5 million firms that took part in the government backed scheme. Altogether the firms owe a huge £4.5 billion in payments.
The figures also show that 151,000 of those in arrears are more than 90 days behind which is often considered the point at which a business is in serious financial distress.
Between May 2020 and March 2021 businesses were able to borrow between £2,000 and £50,000 and this amounted to £47 billion worth of Bounce Back Loans, additionally the six year loans at 2.5% interest were extended by the high street banks, however the risk stayed with the tax payer should the loans be defaulted on.
Todd Davison, MD of Purbeck Personal Guarantee Insurance said “The ease with which business owners and directors were able to secure bounce back loans, with six years to pay off the debt, no personal guarantees and no fees may have come back to bite the UK government which is now facing the prospect of close to £5.5bn lost to the scheme in arrears, fees and interest. In contrast, accessing CBILS was more restrictive with lenders permitted to request personal guarantees on loans of £250,000 and over.”
“There is little doubt that personal guarantees will remain a core feature of any future loan scheme for small businesses from the UK government. Business owners looking to take advantage will need to be prepared and seek advice on how they can mitigate the risk, with insurance being an increasingly common option. Indeed, at Purbeck we have seen demand for PGI up 125% in Q2 2022 vs Q2 2021.
For further support please visit our Bounce Back Loan Help and Advice resource centre.
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